Procurement is the acquisition of goods and/or services at the best possible total cost of ownership, in the right quantity and quality, at the right time, in the right place and from the right source for the direct benefit or use of corporations, or individuals, generally via a contract. Simple procurement may involve nothing more than repeat purchasing. Complex procurement could involve finding long term partners that might fundamentally commit one organization to another. Almost all purchasing decisions include factors like delivery and handling, marginal benefit, and price fluctuations. Procurement generally involves making buying decisions under conditions of scarcity. If good data are available, it is good practice to make use of economic analysis methods such as cost-benefit analysis or cost-utility analysis.
An important distinction is made between analysis without risk and those with risk. Where risk is involved, either in the costs or the benefits, the concept of expected value may be employed. Based on the consumption purposes of the acquired goods and services, procurement activities are often split into two distinct categories. The first category being direct, production-related procurement and the second being indirect, non-production-related procurement.
Direct procurement occurs in manufacturing settings only. It encompasses all items that are part of finished products, such as raw material, components and parts. Direct procurement, which is the focus in supply chain management, directly affects the production process of manufacturing firms. In contrast, indirect procurement activities concern “operating resources” that a company purchases to enable its operations. It comprises a wide variety of goods and services, from standardized low value items like office supplies and machine lubricants to complex and costly products and services like heavy equipment and consulting services.
Procurement systems are well known. A buyer searches a catalog or a catalog database, locates a material of interest, and places an order, also sometimes referred to as a requisition. A supplier then fulfills the order. However, special orders greatly complicate and slow down the entire procurement process as well as greatly increase procurement expense. In practice, a buyer who cannot find an item located in a catalog must fill out a special requisition, also known as a special order request. However, no order is even placed until a potential supplier and related cost and delivery information is provided to the buyer for consideration.
The order or requisition is then sent to a procurement fulfillment organization. A fulfillment specialist reviews the special requisition and manually determines if there are any potential suppliers that can fulfill the special requisition. Potential suppliers are then contacted and they respond accordingly. Each of the suppliers has their own way of describing the items it carries. Thus, the fulfillment specialist must manually review each supplier proposal and determine which ones appear to be most favorable to the buyer.
Many current web based procurement requisition systems utilize time consuming processes to procure and monitor the requisition status of items ordered. The systems are no different for the person ordering frequently than for the person ordering only occasionally. In current systems, requestors or purchasers must use a series of user interface screens to search and purchase items through a series of complex business process screens to submit the requisition for fulfillment. Moreover, the purchaser may only be notified at certain steps in the procurement process, but not for others. Furthermore, purchasers must login to the procurement application to monitor requisition status. There remains a need to provide a simplified process for the purchasers who frequently purchase the same items.